The company's performance reflects the broader challenges facing micro-cap real estate developers in an environment of rising interest costs and project execution pressures. With a proprietary Mojo Score of just 17 out of 100 and a "Strong Sell" rating, the investment case remains weak across multiple parameters including deteriorating financial trends, bearish technicals, and below-average quality metrics despite attractive valuation multiples.
Financial Performance: Revenue Contraction Accelerates
Tirupati Sarjan's Q2 FY26 revenue of ₹37.50 crores represents a significant deterioration, declining 23.03% year-on-year from ₹48.72 crores in Q2 FY25. On a sequential basis, revenue grew 23.07% quarter-on-quarter from ₹30.47 crores in Q1 FY26, but this follows a steep 60.67% decline in the previous quarter. The volatile quarterly pattern suggests lumpy project completion cycles typical of smaller real estate developers, but the year-on-year contraction is more concerning as it indicates weakening underlying demand.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 37.50 | +23.07% | 1.03 | -4.55% | 2.75% |
| Jun'25 | 30.47 | -60.67% | 1.06 | -21.48% | 3.48% |
| Mar'25 | 77.47 | +45.29% | 1.35 | -11.18% | 1.74% |
| Dec'24 | 53.32 | +9.44% | 1.52 | +40.74% | 2.85% |
| Sep'24 | 48.72 | +18.97% | 1.08 | -10.74% | 2.22% |
| Jun'24 | 40.95 | -42.88% | 1.21 | +35.96% | 2.95% |
| Mar'24 | 71.69 | — | 0.89 | — | 1.24% |
Operating margin excluding other income contracted to 6.61% in Q2 FY26 from 7.71% in Q1 FY26, reflecting increased cost pressures. The gross profit margin similarly declined to 4.37% from 5.81% quarter-on-quarter. Net profit margin compressed to 2.75% from 3.48%, indicating that the company is struggling to maintain profitability amid revenue pressures. Employee costs remained relatively stable at ₹0.36 crores, but interest expenses surged 34.44% quarter-on-quarter to ₹1.21 crores from ₹0.90 crores, reflecting higher borrowing costs that are eating into profitability.
Operational Challenges: Weak Returns and High Leverage
The company's operational efficiency metrics paint a concerning picture. Average Return on Equity (ROE) stands at just 3.63%, significantly below industry standards and indicating poor capital efficiency. The latest ROE of 5.41% shows marginal improvement but remains inadequate for a growth-oriented real estate business. Average Return on Capital Employed (ROCE) of 9.11% (latest: 8.38%) is equally weak, suggesting the company generates insufficient returns relative to the capital deployed in its projects.
Critical Operational Weaknesses
Low Return Profile: With average ROE of 3.63% and ROCE of 9.11%, Tirupati Sarjan demonstrates poor capital efficiency. The company's returns are insufficient to justify the risks inherent in real estate development, particularly for a micro-cap entity operating in a competitive Gujarat market.
Elevated Leverage: Average debt-to-EBITDA ratio of 4.31 times indicates high leverage, while EBIT-to-interest coverage of just 1.54 times suggests limited cushion to service debt obligations. Rising interest costs (up 34.44% QoQ) are squeezing profitability.
The balance sheet as of March 2020 (latest available annual data) shows shareholder funds of ₹53.64 crores supporting long-term debt of ₹91.24 crores, resulting in a debt-to-equity ratio of 1.70. Current assets of ₹176.20 crores exceed current liabilities of ₹85.85 crores, providing working capital cushion, but the quality of current assets in real estate (largely inventory and receivables) requires careful monitoring. Fixed assets remain minimal at ₹6.61 crores, typical for developers who focus on project execution rather than owned infrastructure.
Industry Context: Real Estate Sector Headwinds
The real estate sector has shown mixed performance, with the broader Realty sector delivering 2.59% returns over the past year. Tirupati Sarjan has significantly underperformed, posting a negative 24.53% return over the same period, resulting in a 27.12 percentage point underperformance versus its sector. This divergence suggests company-specific challenges beyond sectoral trends, likely related to its micro-cap status, limited geographical presence in Gujarat, and execution challenges.
The company operates primarily in Gujarat, focusing on residential and commercial projects. While Gujarat's real estate market has shown resilience in tier-2 cities, smaller developers like Tirupati Sarjan face intense competition from larger, better-capitalised players. The company's 5-year sales growth of 14.47% demonstrates historical expansion capability, but recent quarterly volatility and year-on-year revenue declines suggest this growth trajectory is faltering.
Sector Positioning Analysis
Tirupati Sarjan's micro-cap status (₹42 crore market capitalisation) limits its access to capital markets and institutional funding. Unlike larger peers with diversified project portfolios across multiple cities, the company's concentrated Gujarat presence exposes it to regional economic cycles. The absence of institutional shareholding (0% FII, MF, and insurance holdings) reflects limited investor confidence and poor liquidity in the stock.
Peer Comparison: Valuation Discount Reflects Fundamental Weakness
Comparing Tirupati Sarjan to its micro-cap real estate peers reveals a company trading at significant valuation discounts, but for justifiable reasons. The company's P/E ratio of 8.23 times compares favourably to peers like Vivid Mercantile (16.63x) and Prime Property (13.09x), but this discount is explained by materially weaker return metrics.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity |
|---|---|---|---|---|
| Tirupati Sarjan | 8.23 | 0.44 | 3.63% | 0.48 |
| Vivid Mercantile | 16.63 | 0.85 | 17.66% | -0.32 |
| Prime Property | 13.09 | 0.57 | 4.07% | -0.09 |
| Tatia Global | 5.47 | 1.35 | 8.81% | -0.14 |
Tirupati Sarjan's ROE of 3.63% is the lowest among comparable peers, with Vivid Mercantile demonstrating superior capital efficiency at 17.66% ROE. The company's price-to-book value of 0.44 times (trading below book value) reflects market scepticism about the realisable value of its assets and future earnings potential. Whilst the low P/BV might appear attractive on surface, it's a value trap given the company's deteriorating financial trends and weak return profile.
Valuation Analysis: Attractive Multiples Cannot Offset Fundamental Concerns
Tirupati Sarjan trades at seemingly attractive valuation multiples: P/E of 8.23 times, P/BV of 0.44 times, and EV/EBITDA of 7.46 times. The company's valuation grade is classified as "Very Attractive," having maintained this status since May 2023. However, attractive valuations alone do not constitute an investment case when underlying fundamentals are deteriorating.
The stock trades 44.36% below its 52-week high of ₹21.62, reached earlier in the fiscal year. The sharp correction reflects growing investor concerns about the company's ability to sustain profitability and navigate a challenging operating environment. The PEG ratio of 1.08 suggests the valuation is reasonable relative to growth expectations, but with EBIT growth of just 1.30% over five years, the growth prospects appear limited.
"Cheap valuations are not synonymous with investment opportunities—Tirupati Sarjan's below-book trading reflects justified concerns about deteriorating fundamentals rather than market inefficiency."
Shareholding Pattern: Stable Promoter Base, Zero Institutional Interest
The shareholding pattern reveals a stable promoter holding of 40.10% as of September 2025, unchanged from the previous quarter but slightly lower than 40.38% in March 2025. The promoter group comprises multiple family members and a holding company, with the largest individual holding at 4.62% (Deepak Bhailal Shah). Positively, there is no promoter pledging, eliminating one source of risk.
| Quarter | Promoter | FII | Mutual Funds | Insurance | Non-Institutional |
|---|---|---|---|---|---|
| Sep'25 | 40.10% | 0.00% | 0.00% | 0.00% | 59.90% |
| Jun'25 | 40.10% | 0.00% | 0.00% | 0.00% | 59.90% |
| Mar'25 | 40.38% | 0.00% | 0.00% | 0.00% | 59.62% |
| Dec'24 | 40.38% | 0.00% | 0.00% | 0.00% | 59.62% |
However, the complete absence of institutional shareholders (0% FII, mutual fund, and insurance holdings) is a significant red flag. Institutional investors typically conduct rigorous due diligence and their absence suggests concerns about corporate governance, financial transparency, or growth prospects. The 59.90% non-institutional holding indicates retail investor dominance, which can contribute to high volatility and limited liquidity.
Stock Performance: Severe Underperformance Across All Timeframes
Tirupati Sarjan's stock performance has been dismal across multiple timeframes, significantly underperforming both the benchmark Sensex and its real estate sector. The stock has declined 24.53% over the past year compared to Sensex's 9.00% gain, resulting in a negative alpha of 33.53 percentage points. Year-to-date performance is even worse at negative 37.38%, whilst the Sensex has gained 8.22%.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -2.04% | +1.62% | -3.66% |
| 1 Month | -9.82% | +3.09% | -12.91% |
| 3 Months | -9.00% | +4.92% | -13.92% |
| 6 Months | -14.07% | +3.97% | -18.04% |
| YTD | -37.38% | +8.22% | -45.60% |
| 1 Year | -24.53% | +9.00% | -33.53% |
| 2 Years | -13.27% | +30.23% | -43.50% |
| 3 Years | +8.97% | +37.22% | -28.25% |
The stock's high beta of 1.50 indicates it is 50% more volatile than the market, amplifying both upside and downside movements. With a risk-adjusted return of negative 0.47 and volatility of 52.46%, the stock falls into the "high risk, low return" category—the worst possible combination for investors. The stock trades below all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), confirming the established bearish trend.
Investment Thesis: Multiple Red Flags Outweigh Valuation Appeal
The investment thesis for Tirupati Sarjan is significantly challenged by multiple converging negative factors. The company's Mojo Score of 17 out of 100 reflects poor performance across all four key assessment parameters: near-term drivers (negative financial trend and bearish technicals), quality (below average), valuation (very attractive but insufficient), and overall assessment (cautious).
The technical trend remains firmly bearish, with the stock changing to bearish from mildly bearish on November 3, 2025. All technical indicators—MACD, Bollinger Bands, and moving averages—signal bearish conditions on both weekly and monthly timeframes. The stock's position just 6.27% above its 52-week low of ₹11.32 provides minimal downside cushion whilst the distance from the 52-week high of ₹21.62 (44.36% below) illustrates the magnitude of the correction.
Key Strengths & Risk Factors
Key Strengths
- Attractive Valuation Multiples: Trading at P/E of 8.23x and P/BV of 0.44x, well below book value and industry averages
- No Promoter Pledging: Zero pledged shares eliminates concerns about forced selling or loss of control
- Stable Promoter Holding: 40.10% promoter stake demonstrates continued commitment despite challenges
- Historical Growth: 5-year sales CAGR of 14.47% shows past expansion capability
- Working Capital Cushion: Current assets of ₹176.20 crores exceed current liabilities, providing operational buffer
Key Concerns
- Deteriorating Revenue Trajectory: Q2 FY26 revenue down 23.03% YoY, indicating weakening demand and execution challenges
- Weak Return Metrics: ROE of 3.63% and ROCE of 9.11% are inadequate for a growth-oriented real estate business
- Margin Compression: Operating margins declining from 7.71% to 6.61% QoQ, PAT margins falling to 2.75%
- Rising Interest Burden: Interest costs surged 34.44% QoQ, squeezing profitability in a high-rate environment
- Zero Institutional Interest: Complete absence of FII, MF, and insurance holdings signals lack of confidence
- High Leverage: Debt-to-EBITDA of 4.31x and weak interest coverage of 1.54x limit financial flexibility
- Severe Stock Underperformance: Down 24.53% over one year vs Sensex gain of 9.00%, negative alpha of 33.53%
Outlook: What to Watch
Positive Catalysts
- Stabilisation of quarterly revenue above ₹50 crores consistently
- Margin expansion back towards 8-10% operating margin levels
- New project launches in Gujarat's tier-2 cities with pre-sales momentum
- Reduction in debt levels and improvement in interest coverage ratio
- Entry of institutional investors or strategic partners
Red Flags
- Further revenue decline below ₹35 crores in upcoming quarters
- Operating margins falling below 6% on a sustained basis
- Interest costs continuing to rise, eroding profitability further
- Continued absence of institutional buying interest
- Stock breaking below 52-week low of ₹11.32 decisively
The Verdict: Fundamental Deterioration Justifies Strong Sell Rating
Score: 17/100
For Fresh Investors: Avoid initiating any position in Tirupati Sarjan. The combination of deteriorating financial trends, weak return metrics, rising leverage costs, and bearish technical setup creates an unfavourable risk-reward profile. Whilst valuation multiples appear attractive, they represent a value trap given the company's fundamental challenges. The complete absence of institutional interest is a significant warning sign.
For Existing Holders: Consider exiting positions on any technical bounce towards the ₹13.00-13.50 range (20-day and 50-day moving average resistance). The company's weak operational performance, margin compression, and deteriorating financial trend suggest limited near-term catalysts for recovery. The high-risk, low-return profile (52.46% volatility with negative returns) makes this an unsuitable holding for most portfolios.
Fair Value Estimate: Given the weak fundamentals and negative trends, the current price of ₹12.03 appears fairly valued to slightly overvalued. A fair value estimate of ₹10.50-11.00 (12.5% downside) better reflects the company's challenged earnings outlook and below-average quality metrics. Re-evaluation warranted only if quarterly results show sustained improvement in revenue growth and margin expansion.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
